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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER BENCH:- This is an appeal for A.Y. 2018-19 filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi dated 31-03- 2022, in DIN & Order No. ITBA/NFAC/S/250/2021-22/1042324338(1), in Page No 2 Shri M.F. Mehta Family Discretionary Trust vs. DCIT(CPC) proceedings under section 154 of the Income Tax Act, 1961; in short “the Act”.
The assessee has taken the following grounds of appeal:-
“1. The CIT(A) erred in holding that the appellant was liable to tax at the maximum marginal rate. This was the only trust created under a will and hence was liable to be taxed as in individual.”
The brief facts of the case are the assessee is a private trust, created under a will in view of the decision of Supreme Court in the case of Deepak family trust, and assessee filed return of income for assessment year 2018-19 declaring income of � 1,30,490/-. The same was processed under section 143(1) of the Act by determining total income at � 1,30,490/- and demand of � 47,998/-was raised. The tax was calculated at maximum marginal rate. The assessee filed rectification application against which the CPC, Bengaluru passed order under section 154 of the Act, confirming the order passed under section 143(1) of the Act. Aggrieved, the assessee filed appeal before Ld. CIT(A), who dismissed the assessee’s appeal with the following observations”
“4. Appellant filed copy of will of Late Mr. Manilal Fulchand Mehta in which the discretionary trust was created with Mr. Anil Mehta and Mr. Pranav Mehta as trustees and it is created for benefit of Anil Mehta, Pranav Mehta and any other member added to the family on A/c of birth or marriage and the benefits to be distributed in whatever ratio the trustees decide.
Page No 3 Shri M.F. Mehta Family Discretionary Trust vs. DCIT(CPC)
5. In this case, the share of income of each beneficiary is not fixed and the beneficiaries themselves are not fixed, then the income of such discretionary trust is liable to charged at maximum marginal tax as per provision of section 164 of the IT Act.”
Before us, the counsel for the assessee submitted that the assessee trust was created under a will. He brought attention to copy of will of Mr M.F. Mehta (at pages 4-6 of paper book). Further, the assessee drew our attention to the case of Deepak Family Trust 211 ITR 575 (Gujarat High Court), wherein the Gujarat High Court held that trustees of a discretionary trust have to be assessed in status of 'individual' and not in status of 'association of persons. Accordingly, the counsel for the assessee argued that in case of trust formed under a will, in view of the decision of the Gujarat High Court in the case of Deepak Family Trust supra, the assessee trust was required to be assessed at individual rates of taxation and not at the maximum marginal rate of taxation, as done in the present case. In response, DR relied on the observations made in the order passed by Ld. CIT(A).
We have heard the rival contentions and perused the material on record. We observe that the Ld. CIT(A) dismissed the assessee’s appeal in a very summary manner, without considering the impact of the decision the case of Deepak Family Trust supra. Accordingly, the interest of justice, the case is being set aside to the file of the Ld. CIT(A) for de novo adjudication, after giving adequate opportunity of hearing to the assessee and after taking into consideration the impact of the decision in the Gujarat High Court in the case of Deepak Family Trust supra.
Page No 4 Shri M.F. Mehta Family Discretionary Trust vs. DCIT(CPC)
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 14-09-2022